Chuck Hagel Was Supposed to Fix the Pentagon's Budget. Now It's His Successor's Problem.

November 24, 2014

When Secretary of Defense Chuck Hagel took office in February 2013, he was supposed to guide the Department of Defense (DOD) through steep budget cuts. Less than two years later, Hagel is resigning after a collection of foreign policy failures and tension with the White House. He didn’t change much with the Defense budget, either—though that stems less from a personal failing than it does structural problems that make significant Defense changes practically impossible.

Had he lasted four years, as he had planned, then Hagel certainly would have made more progress in modernizing the Department. But during his limited period, he had very little flexibility in implementing the cuts. Sequestration took effect took effect two days after he was sworn in, for instance, forcing him to institute a hiring freeze and a furlough of civilian employees—a plan developed by his predecessor, Leon Panetta.

“We’ve been in this pattern with the defense budget where folks in the administration, within DOD, and within Congress have all been arguing against sequestration and the budget caps but nothing has actually happened to fix the problem,” said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments who has authored a comprehensive analysis on the 2015 defense budget. “That really has continued under Hagel’s time at the Pentagon. When he took over, sequestration was looming and as he’s leaving, it’s still looming. I don’t think any secretary could have changed that debate very much.”

The Murray-Ryan budget deal at the end of 2013 reduced the sequester’s defense spending cuts by a total of $32 billion in the 2014 and 2015 fiscal year budgets. That made it easier for Hagel to obey the law, although he still had some tough choices to make. In February, he outlined some of those choices. The Army’s troop levels would be reduced to around 440,000-450,000 in the coming years, down from a peak of 570,000 in the post-9/11 era. Hagel’s plan also required higher health care deductibles from military retirees and reduced the tax benefits on housing for military personnel. But the House Armed Services Committee rejected those benefit cuts in May. The Senate Appropriations Committee retained more of Hagel’s reforms in its defense authorization bill. But both houses have yet to agree on a final version.

Complicating all of this is the uncertainty over our military engagements in the Middle East. When Hagel first announced those cuts, the war in Iraq was over and the war in Afghanistan was set to end at the end of the year. Now, American troops are working in Iraq and Syria to train moderate Syrian rebels and over the weekend, the Obama administration extended the military’s role in Afghanistan in 2015. Those campaigns will require more money, which the Defense Department can request through Overseas Contingency Operations (OCO) funding—war funding requests above the base DOD budget. For instance, on November 7, the White House increased its OCO funding request by $3.2 billion for the fight against the Islamic State. That avoids the sequesters caps but total defense spending still rises.

Hagel has tried to make strategic cuts that modernize the Pentagon while imploring Congress to undo the harmful effects of sequestration. But unforeseen events abroad and lack of political will in Congress have doomed those efforts. For Hagel’s successor, those obstacles aren’t going away.